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Energy intensities and the impact of high energy prices on producing and consuming sectors in Malaysia

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  • Klinge Jacobsen, Henrik

Abstract

The increase in oil prices has put pressure on the global economy. Even economies that have a high degree of self-sufficiency concerning oil products are experiencing rising production costs and price increases for households energy use. Therefore, changes in energy policies are under consideration for countries highly dependent on imported energy as well as countries with a high degree of self-sufficiency. Examination of dependence on cheap energy sources for economic growth in different economic sectors is becoming more important as countries are trying to promote activities that are less energy intense. Among the policy changes under consideration, the adjustment of domestic energy subsidies is of particular interest. The effect of high energy prices on a fast growing economy, such as in Malaysia, is considerable, as the country will shift from being a net exporter of energy to a net importer in less than 10 years. Malaysia until recently has experienced increasing overall energy intensity and the growth up to 2000 was quite high, especially for electricity intensity. A continued rise in energy intensity will be quite problematic in this new high oil price regime. This paper investigates the impact of rising energy prices on production costs for the different sectors of the Malaysian economy. Input-output calculations demonstrate that the impact on the exporting component of the manufacturing sectors is less than for the average production. Therefore the production cost increase caused by, for example, an adjustment in electricity prices of 25% will result in less than ½% increase. As the competing countries in world markets are experiencing the same rise in energy costs, including electricity based on fossil fuels, there is no vital argument for not allowing domestic energy prices to adjust to the international price changes.

Suggested Citation

  • Klinge Jacobsen, Henrik, 2007. "Energy intensities and the impact of high energy prices on producing and consuming sectors in Malaysia," MPRA Paper 42130, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42130
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    File URL: https://mpra.ub.uni-muenchen.de/42130/1/MPRA_paper_42130.pdf
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    References listed on IDEAS

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    1. Peter Oosterveer & Somporn Kamolsiripichaiporn & Rajah Rasiah, 2006. "The ‘Greening’ of Industry and Development in Southeast Asia: Perspectives on Industrial Transformation and Environmental Regulation; Introduction," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 8(2), pages 217-227, May.
    2. Tran Dieu, 2006. "Greening Food Processing Industries In Vietnam: Opportunities And Constraints," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 8(2), pages 229-249, May.
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    Cited by:

    1. Zohreh Salimian & Marjan Kordbacheh & Mehdi Sadeghi Shahdani & Vahab Mokarizadeh, 2012. "Analyzing the Effects of the Iranian Energy Subsidy Reform Plan on Short-Run Marginal Generation Cost of Electricity Using Extended Input-Output Price Model," International Journal of Energy Economics and Policy, Econjournals, vol. 2(4), pages 250-262.

    More about this item

    Keywords

    Energy use; energy prices; input-output;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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